After tough years, Long Island office market shows clear signs of recovery – Trade Observer

For the Long Island office market, 2021 has been a mildly restorative year after the virtual economic collapse caused by our 2020 immersion in COVID-19. While the market is still below the thriving numbers of 2019, the Long Island office market appears to be at the start of a rebound.

According to Colliers, positive absorption returned to the LI office market in Q3 2021 after five consecutive quarters of negative net absorption. Long Island posted 305,363 square feet of positive net absorption in the third quarter, improving availability by 90 basis points to 9.2%. Colliers also noted that while asking rents were broadly flat at $27 per square foot, Class A spaces “were asking for a 9.6% premium at $29.98 per square foot.”

After all-time highs in office availability throughout 2020, Long Island’s availability hit 11.4% in the fourth quarter of 2021, according to Avison Young. Asking rents began to rise, with fourth-quarter rents 0.1% higher than a year earlier. Sublease availability, however, continued to weigh on office fundamentals, with 687,000 square feet of sublease space available.

But a fourth quarter 2021 office report from Newmark called this period an “inflection point” for the Long Island office market, citing 473,435 square feet of positive net uptake this quarter, which brought the total year-end at a positive 250,962 square feet. (In comparison, total net absorption for 2020 was negative 1.32 million square feet.)

The Newmark report reiterates the stabilizing effect of 2021.

“With a dense population of skilled workers and growing demand for modern amenities, Long Island office fundamentals have remained stable in a period of economic uncertainty,” the report said.

Marc Fogel, a partner at Berdon Accountants and Advisors, notes that hybrid work schedules are why office life is making a return – though not a full one – to pre-COVID occupancy numbers.

“More than two years have now passed since the start of the pandemic and many people are working remotely 100% of that time. People have become very comfortable working from home,” Fogel said. “While the majority of these people are returning to the office, many will be looking for some sort of hybrid work-from-home schedule a number of days a week.”

Still, the numbers are improving. Newmark expressed the vacancy rate at the end of the fourth quarter of 2021 at 9.7%, noting that in comparison, “vacancy rates in the markets of the three neighboring suburban states hovered slightly above 20% at the end of 2021”.

“The broader statistics can indicate both improved activity and increased supply through direct and sublease space,” said David Pennetta, executive managing director, LI, for Cushman & Wakefield. “We looked at Class A office buildings with 50,000+ square feet of availability, and that vacancy rate was just 1.75%. No speculative new construction since the mid-late 2000s n This is a contributing factor. Class A rents are expected to reach new highs for higher vacancies.

Avison Young noted several conditions in his report that seemed to indicate an environment ripe for a successful return to the office. Long Island’s unemployment rate has fallen “from a post-COVID high of 17.5% in April 2020 to 4% in October 2021”, and “the share of Long Island’s total population that is fully immunized is 71.9%, which is higher than the national average and may encourage greater back-to-office efforts.

Fogel also noted that Long Island would benefit from residents losing their desire to move after the pandemic.

“Companies headquartered in New York may consider opening offices in the suburbs – i.e. Long Island – to help retain employees who no longer want to endure long commutes and to promote collaboration and maintain their corporate culture in these satellite offices,” said Fogel.

Just this month, according to press day, Hotaling Insurance Services has moved from its Manhattan headquarters to 6,500 square feet in Melville. Its new office will accommodate 40 to 60 employees. The company’s CEO and co-founder, Bobby Hotaling, attributed the move to his employees who no longer wanted to travel to New York.

None of this is to say that the space woes of the pandemic are coming to an end. Avison Young’s report also noted that as “office occupiers continue to navigate their long-term work strategies,” post-COVID annualized leasing activity is 32 times lower last year. .6% to the annual average of the last 20 years”.

Still, 2022 shows signs of continued recovery for the office market.

For the first quarter of 2022, Colliers reported 74,017 square feet of positive net absorption on Long Island. The quarter also saw news of Long Island’s largest office transaction in years, when The Birch Group purchased a 665,000 square foot office portfolio in January consisting of two Class A office buildings in Jericho, NY, for $212 million from DRA Advisors and Onyx Equities. .

And while it’s an outlier in its size, office deals are happening elsewhere. According Long Island Business NewsGold Coast HDM Realty has acquired a 15,000 square foot building comprising 8,500 square feet of office space and 6,500 square feet of warehouse space at 275 Oser Avenue in Hauppauge from DNR Holding for $3.25 million.

Other office deals in the first quarter, according to a Cushman & Wakefield report, include just over 43,000 square feet at 1180 Veterans Memorial Highway in Hauppauge for $6.5 million; a 31,500 square foot office at 160 Oser Avenue in Hauppauge for $6.6 million; and 21,000 square feet at 50 Glen Street in Glen Cove from Equishares Real Estate to Edward Khalily for $6.1 million.

The report also highlights several major new office leases, including 17,500 square feet at 1985 Marcus Avenue in Western Nassau County to WellLife Network, 12,500 square feet at 11 Oval Drive in Central Suffolk County to ThyssenKrupp Elevator and 11,111 square feet at 265 Broadhollow Road in Western Suffolk at Planet Home Lending.

So while pre-pandemic highs may be out of reach at this time, there is no doubt that the Long Island office market is enjoying a revival and the worst days of the COVID office slump on Long Island are a thing of the past. .

“I think the Long Island office market has a real opportunity to thrive in the years to come,” Fogel said. “We are slowly emerging from the pandemic, and as more people are vaccinated and strengthened and additional treatments to cure or prevent COVID-19 are discovered, this should allow more people to return to the office. “

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Jose C. Birney